LOCATION, location, location must be foremost in the minds of City Lodge executives as the team, led by nonexecutive chairman and founder Hans Enderle, embarks on an expansion drive that should see the group open up to four hotels a year.

Buoyed by SA’s consumer-driven economic boom, Enderle wants City Lodge to open two to four hotels a year.

At a cost of nearly R100m, the group intends to build three new hotels this financial year.

City Lodge has 37 hotels across the country, with 77% occupancy levels. More than two-thirds of the group’s customers are local and international business travellers.

Enderle reasons that with 30000 rooms and guest houses available in the country, and economic growth of between 5% and 6% expected, an additional 1500 rooms are needed every year. That figure translates into 10 City Lodge hotels.

Finding the appropriate sites at the best price will be the biggest challenge to the group’s ambitions, an analyst says. Finding the right site is not easy, primarily due to a land shortage. The country’s boom in residential building has also pushed up land prices.

The group has faced regulatory and licence obstacles to its expansion plans.

In the group’s interim numbers to end-December last year, it announced the imminent opening of Lodges in George, Centurion and Roodepoort.

But come year-end in June, the group said the ribbon-cutting at the George development had been delayed, and that there were some regulatory glitches surrounding the Centurion development and the Roodepoort venture.

The group has R430m worth of property on its balance sheet with a replacement value of close to R1,2bn.

Unlike most of its contemporaries, it owns most of its properties.

In compensation for the land shortage, City Lodge — which used to build its hotels on sites as big as 10000m² — has changed its model to 4000m² of space — with basement parking.

However, Enderle is reported to have said that he would like to build large hotels if possible, saying he would not be shy of 250 rooms compared with the norm of 160.

The City Lodge at Cape Town’s V&A Waterfront is the largest, and has about 210 rooms.

Enderle’s vision of truly huge hotels is sure to put further pressure on the team to find suitable sites, in terms of price and scale, for the hotels.

Enderle started City Lodge 20 years ago, after leaving the Holiday Inn group.

After the sale of the Holiday Inn company to Southern Sun hotels in the 1980s, Enderle decided not to join the merged company.

Instead, he chose to buy a half-built hotel in Sandton. This venture marked the beginning of the City Lodge group. From its beginnings, the group has achieved average annual compound growth of 50%.